(Bloomberg) -- Saudi Arabia laid out key elements of its borrowing plans for 2017 as the kingdom seeks to capitalize on investor demand for its debut sale this year to finance the budget deficit.
The world's biggest oil exporter plans to raise between $10 billion and $15 billion from international bond markets, Mohammad Al Tuwaijri, secretary-general of the Finance Committee at the Royal Court, told Saudi-owned Al Arabiya television. Authorities will sell about 70 billion riyals ($18.7 billion) locally, he said.
Officials from Saudi Arabia have met with banks to discuss the potential sale of Shariah-compliant bonds in the first quarter, according to five people familiar with the matter. Saudi Arabia raised $17.5 billion in October in the biggest ever emerging-market bond sale, attracting $67 billion of bids, people familiar with the sale told Bloomberg at the time.
Finance Minister Mohammed Al-Jadaan told Bloomberg News on Thursday the country will “most likely” tap debt markets in the first quarter. “We will issue sukuk, but we will issue other instruments at the same time,” he said, declining to give more details. He said the timing will depend on the conditions of the markets. “We are very comfortable about our cash flow,” he said.
The kingdom is turning to debt markets to help fill one of the highest budget deficits in the Middle East after the slump in oil prices battered its revenue. Officials said on Thursday the shortfall will likely keep narrowing before possibly turning into a surplus by 2020.
The country is considering selling sukuk with different maturities to the five-, 10- and 30-year debt it sold in October, one of the people said, asking not to be identified as the information is private. This could include tenors of seven and 16 years, the person said. No final decisions on the size or timing have been made, the people said.
A 16-year sukuk “would be in exceptional demand from Shariah-compliant investors starved of long-duration investment alternatives,” said Emad Mostaque, a London-based strategist at Ecstrat, a consultancy advising on asset allocation between global equity markets.
--With assistance from Dana Khraiche and Glen Carey
To contact the reporter on this story: Alaa Shahine in Dubai at asalha@bloomberg.net.
To contact the editors responsible for this story: Alaa Shahine at asalha@bloomberg.net, Amy Teibel
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